Agape Insurance Brokers
Integrity, Experience & Professional

Types of Insurance
Understanding The Most Common Types of Individual Insurance


There are many options with coverage, depending on your situation. And there are three main categories of life insurance: term life, universal life, and whole life insurance.

Term Life

Term life is the simplest and least expensive type of policy. It's pure insurance with no cash value account. A term life policy has only one function: to pay a specific lump sum to whoever you've designated, upon a specific event, your death. Most insurers have a minimum insured amount of $100,000.  California limits the longest level term insurance period at 30 yrs.

Whole Life

Whole life
insurance
provides permanent protection while building a cash value account. This type of insurance typically pays a dividend or interest declared by the insurance company each year based on their overall performance. It is by far the most expensive type of life insurance. The ONLY advantage it has over other types of life insurance is that it has relatively more guarantees. If you wish to know the total breakdown of cost involved in a whole life program, then you will be disappointed....... you may as well consider alternatives.

Features of Whole Life

  • Partial guaranteed cash value
  • Guaranteed premium for a lifetime


Universal Life (UL)


Universal life (UL) insurance provides permanent protection with lower and more flexible premium. Because of its flexibility in structure and premium to fit the individual need of clients, it is growing much faster. It pays declared interest rates at the end of each policy year.

Features of Universal Life:

  • Flexibility - You decide how much life insurance you need - subject to insurability and IRS  imitations, you can adjust the death benefit and premium payments to fit your changing needs
  • Security - it provides long term protection of loved ones against possible financial hardship in the event of insured's death
  • Tax free death benefit - generally death proceeds from a life insurance is income tax free to the beneficiary
  • Tax deferred account value growth - cash value within a life insurance is tax deferred and possibly tax free
Two most popular variations are:

1.  Variable Universal Life(VUL) insurance operates in a similar structure as UL. The main difference is that it allows the policy owner to pick and choose from long list of 3rd party unit investment funds made available to that particular contract. These funds are often mirror funds in the open market. Your money within a VUL is typically kept separate from the general account of company as a Trust Account. End of each year, you will be provided detailed report of all expenses related to your policy.

2.  Indexed Life insurance (IUL) has the same working chassis as a UL and thus have identical benefits as other types of UL policies. The growth of cash value within the policy is dependent on performance of stock market index such as Standard & Poor. Even though the ROI on your premium is directly dependent on the index, your premium is never directly invested in the stock market; it just mirrors it. Other indexes used for this type of insurance include Hang Seng Index (Hong Kong), Eurostox 50 etc. 

VUL and Indexed life insurance typically charges a net zero loan cost for getting money out of the savings component of your life insurance policy on a tax free basis.

3. Guaranteed Universal Life (GUL)  uses the chaise of a Universal life Insurance to guaranteed premium and death benefit of the life insurance upto a lifetime.  The interesting twist to this option is that it looks and feels like a term insurance, because it is a product meant to provide lifetime protection at the lowest cost....with no forced savings component. 



Disability Insurance
(DI)

Statistically, an individual’s chances of disability are 2 to 3 times greater than death during their working years. It is meant to protect your income during your working years. Typically, you can insure/protect up to 66% of your income prior to disability. While State Disability requires you not to be able to work before you can collect from them, personal professional DI protects you in your OWN profession. The right policy will pay you a DI income for any injury or sickness that lead you being unable to work in your own profession ..... even if you had to change careers, they will continue to pay you until benefit period ends. Benefit period can range from 2 yrs, 5 yrs, 10 yrs, to age 65 or even age 70. 

Long-Term Disability policies (LTD) have a waiting period of several weeks to several months with a maximum benefit period ranging from a few years to the rest of your life. LTD have two different protection features that are most important. 

  1. Noncancelable means the policy cannot be canceled by the insurance company, except for nonpayment of premiums. This gives you the right to renew the policy every year without an increase in the premium or a reduction in benefits.

  2. Guaranteed renewable gives you the right to renew the policy with the same benefits and not have the policy canceled by the company. However, your insurer has the right to increase your premiums as long as it does so for all other policyholders in the same rating class as you.

In addition to the traditional disability policies, there are several options you should consider when purchasing a policy:

  • Additional purchase option gives you the right to buy additional insurance at a later time without going through a physical exam again.

  • Coordination of benefits in thepolicy specifies a target amount you will receive from all the policies combined, so this policy will make up the difference not paid by other policies.

  • Cost of living adjustment (COLA) increases your disability benefits over time based on the increased cost of living measured by the Consumer Price Index.

  • Residual or partial disability rider
    This provision allows you to return to work part-time, collect part of your salary and receive a partial disability payment if you are still partially disabled.

  • Return of premium clause refunds part of your premium if no claims are made for a specific period of time declared in the policy.

  • Waiver of premium provision means that you do not have to pay premium After the waiting period, while you are disabled and collecting DI benefits.



Group Insurance


Our office also handle Group Insurance for companies. We have access to practically all the insurers in this marketplace for:

  • Group Life Insurance
  • Group Health Insurance
  • Group Dental and Vision
  • Key Person Insurance
  • Buy-Sell Agreement
  • Disability Buy-Sell 
  • Disability Overhead 
  • Discriminating Executive Pension Plans
For more information, please fee free to contact us at 510-894-8956.



Annuities


An annuity is an insurance product that pays out income, and can be used as part of a retirement strategy. Annuities are a popular choice for investors who want to receive a steady income stream in retirement and are designed to insure the contract owner against the risk of outliving one’s income. Older investors who run out of money to support themselves face a dire dilemma. Annuities were therefore created in order to mitigate this risk.

These contracts are guaranteed to pay out at least a certain minimum amount on a periodic basis to the beneficiary until death, even if the total payments exceed the amount paid into the contract plus any accrued interest or gain. You can opt to receive payments for the rest of your life, or for a set number of years. How much you receive depends on whether you opt for a guaranteed payout (fixed annuity) or a payout stream determined by the performance of your annuity's underlying investments (variable annuity). Typically Variable Annuities have a much higher ongoing expense charge than Fixed Annuities. Fixed annuities include Indexed Annuities that base returns on mirrored performance of some stock indexes such as S&P.

 In the past, the biggest complaint about annuities is that if the annuitant dies ear;y, all the remaining premium they invested into the annuity would be forfeited by the insurer.  In the recent years, annuity has somewhat changed. There are now annuities that will guarantee a lifetime income to an annuitant based on initial lump sum investment, but will also guarantee that if the income payout to annuitant has not exceeded the sum he invested, the rest of this lump sum can be returned to the beneficiaries of the annuitant. This is a significant change to some of these products in the marketplace. Please note that this applies only to some of the annuity products.


IRS stipulates that you cannot withdraw funds penalty-free until you are age 59 1/2, annuities are considered retirement savings vehicles by nature.


There are 2 main types of annuities:

 1) Immediate Annuity (also commonly as Single Premium Immediate Annuity -SPIA)
This type of annuity will start an immediate stream of income for the annuitant, for his/her remaining life. Fixed SPIA will generate a fixed income. Variable SPIA income may vary based on investment return.

2) 
Deferred Annuity
As discussed above, an annuitant invest a lump sum with the insurer that will guarantee them a lifetime income in the future.  No income or capital gains tax is paid in the meantime.  The other important development in this marketplace is that most insurers are now offering an INCOME RIDER to entice annuitants to keep their money with the company by promising to pay them a higher retirement based on higher returns if the annuitant use them as their lifetime income provider for that lump sum. Since it is a fairly new concept. call us if there are any further questions. 

Other possible riders on the annuity include Cost of Living Adjustments to the income stream ( to keep pace with inflation), Return of premium (to forgo early penalties for termination of contract) , etc



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